Press Release April 24 1998
REVIEW OF THE FIRST QUARTER OF 1998
growth in Barbados was estimated at 4.7% during the first
quarter of 1998, compared with an average of 4.1% for the same
period in 1996 and 1997. The export sectors continued to be the
economy’s mainstay, expanding by 6.9%, following growth rates
of 9.1% and 1.6% in 1996 and 1997, respectively. Activities
which use foreign exchange grew by 3.5%, a slightly higher rate
of growth than that recorded one year earlier.
Real GDP growth rates
The buoyancy of
tourism, with output rising by almost 17%, was responsible for
the expansion in the foreign exchange earnings sectors. The
increase in long-stay visitors (14%) was well above the average
for the comparable period from 1995 to 1997. One major factor
was the large number of U.K. tourists coming to witness the
cricket matches between the West Indies and England. There were
also increased arrivals from the US,
European markets and Caricom. The number of visitors from
Germany fell, though by less than for last year, and the decline
in tourists from Canada reversed the gains that were made in the
first quarter of 1997.
Tourism Arrivals by Market
The number of
cruise passenger arrivals declined by 2.2%. More ships are now
departing from Miami instead of Puerto Rico and the increased
length of the voyage has resulted in fewer vessels visiting
Barbados. Nevertheless, tourism’s performance is the best on
record since 1994, when, again because of cricket, real output
in the sector grew by 18.7%.
fell by 19.5% to 26,000 tonnes - the first decline in three
years - because of prolonged drought in the 1997 growing season.
The unusually dry weather also adversely affected food crops and
milk production, resulting in a 2.6% decline in output of
non-sugar agriculture. In manufacturing, output rose by 1.8%
during the first quarter. This reversal of the situation one
year earlier, was made possible by increased production of
processed foods, beverages and chemicals.
Growth in the
non-traded sectors was more broad-based. Construction expanded
by an estimated 5.5% - the fifth consecutive quarter of growth
of this magnitude - as the momentum in public road repairs and
private sector projects, in particular tourism-related, was
maintained. The activity in tourism and construction helped to
boost the wholesale and retail sector by 4.8% and growth was
also recorded for transportation, storage and communication
(2.9%), business and other services (3.2%) and electricity, gas
and water (5.5%).
At the end of
February, 1998, the rate of inflation as measured by the
12-month moving average was 5.6%, compared to 3.5% at the
corresponding point in 1997. On a point-to-point basis, the
price index fell at a rate of 2.6% during February this year,
compared to an increase of 8.9% at February 1997. The reduction
in the inflation rate is partly the result of measures taken
during the Budget in September last year to alleviate the burden
of higher prices caused by the introduction of the Value Added
Tax (VAT). The unemployment rate at the end of 1997 was 12.2%,
compared with 14.3% one year earlier.
Change in Net
international reserves (NIR) rose by $74.0 million during the
first quarter of 1998, following increases of $97.1 million and
$112 million for the same period in 1996 and 1997, respectively.
While earnings from tourism were estimated at 16.3% higher than
for last year, inflows from merchandise exports were lower by
21% because no earnings from sugar were received during the
quarter. On the debit side of the balance of payments, retained
imports rose by 13.2%, compared to 9% growth between January and
March last year.
account was also weaker than a year earlier. Foreign financing
for the private sector was estimated to be about one fifth the
amount in the first quarter of 1997, and repayment of foreign
debt by Government exceeded project funds by $5.7 million. At
the end of March this year, the liquid foreign reserves were
equivalent to 13.6 weeks’ imports, compared to 14.3 weeks at
December 31, 1997 and 17.5 weeks a year earlier.
Capital Account BOP
During the first
quarter of 1998, the fiscal deficit as measured by the Central
Bank, was estimated to be $23.8 million, compared to $34.6
million one year earlier. Revenue rose by 9%, on the strength of
increased collections from taxes on incomes and profits and a
higher intake from the VAT and excises. Total expenditure was up
by about 6%, compared to a 9% rise in the same period last year.
Payments for wages and salaries were higher by nearly 31%, as
some $30 million in arrears were paid consequent upon the
conclusion of a new contract. Outlays on goods and services were
up by one fifth. However, capital expenditure fell to $70
million, from $108 million in the first quarter of 1997, as some
projects were not fully executed.
(January - March) ($ Million)
& Net Lending
During the fiscal
year ending in March 1998 the fiscal deficit improved to $26.8
million (0.7% of GDP) from $120.2 million (3.4% of GDP) in
financial year 1996/97. Total revenue increased by 19%, thanks
to much higher collections of indirect taxes, while expenditure
was up by 10.1%.
liquidity in commercial banks on the decline, their net
financing of Government’s operations fell by about $38 million
between January and March this year, in contrast to an $84.1
million rise in the corresponding quarter of 1997. Credit from
the Central Bank also declined by nearly $75 million, after
falling by $122.6 million in the corresponding three months of
1997. Insurance companies, credit unions and other non-bank
financial entities lent Government an estimated $114 million
while the National Insurance Scheme provided $28 million.
At March 31, 1998
the excess liquidity ratio stood at 11.7%, a reduction of 2.3
percentage points from the figure at the same time last year.
During the quarter, domestic deposits grew by less than 1%,
roughly one fifth of the rate of expansion in the comparable
three months of 1997; this resulted mainly from the slowdown in
foreign exchange inflows and the purchase of Government
securities by non-banks. In contrast, commercial bank lending to
private business increased by a little more than last year. The
tighter liquidity situation was reflected in an increase in the
treasury bill rate to 5.98% at the end of the quarter, from
4.75% at the end of 1997 and 4.91% a year earlier.
OUTLOOK FOR 1998
Real GDP is expected to grow by
about 3% in 1998. Tourism will benefit from an influx of
tourists from the U.K. and Caricom for the upcoming England
Cricket Tour while output of both the manufacturing and
agricultural sectors is expected to grow moderately. However,
sugar production is likely to be lower in 1998 reflecting an
extended period of drought in the planting season last year and
reduced acreage owing to a higher incidence of cane fires.
Continued growth in the economy
and investment in tourism-related and other private sector
projects as well as government’s on-going capital works
programme should bolster construction activity, the wholesale
and retail trade and other sectors which use foreign exchange.
The initial impact of the VAT
should have run its course during 1997 and inflation is expected
to revert to the normal rate of about 3%.
The increase in the NIR in 1998
may be larger than in the previous year on the strength of
higher travel receipts and increased long term capital inflows.
Government is expected to
maintain fiscal prudence with the deficit around 2% of GDP.
Revenue should grow by only a moderate amount owing to the
removal of the VAT on the basket of food items. However, current
expenditure should increase because of a higher wage bill while
capital outlays should remain high as the momentum of
Government’s capital works programme continues.
|Real GDP growth (%)
|Inflation rate (%)
|NIR (Changes $M)
|Import Reserve Cover
|Fiscal balance to GDP